Yahoo Finance MercadoLibre, Inc. (NASDAQ:MELI) Q3 2023 Earnings Call Transcript
MercadoLibre, Inc. (NASDAQ:MELI) Q3 2023 Earnings Call Transcript November 1, 2023
Martin de los Santos: Hello, everyone. I am Martin de los Santos, MercadoLibre's CFO. For those of you who haven't met me, I have been at MELI since 2007. First as a Board member and since 2012 as a public management team. For the past seven years, I have led the credit business and the last August when I took the position of CFO. I look forward to meeting as many of you as possible in due course. I am pleased to report a strong set of results in my first quarter of CFO with a strong successful third quarter across geographies, 2023 continues to show an attractive combination of growth and profitability with a record in income from operations, with strong momentum across geographies in both commerce and fintech MELI’s revenues growth accelerated.
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Mexico was particularly strong with revenues growing above 60% year-on-year, while Brazil also posted a greater performance with around 40% growth. These two countries have again increased their contribution to our total revenues. This strong business growth combined with cost discipline led to OpEx and SG&A dilution as the business continues to scale. Income from operations more than doubled year-on-year for the fourth consecutive quarter with margins expanding once again. Brazil was the largest contributor to our profit growth, representing a significant portion of it. During Q3, in the commerce business, we saw acceleration in GMV and items sold growth in the three main geographies where we operate with higher items provider. This higher user engagement come from continued experience improvements, especially on the logistics front where we reached 48% of fulfillment penetration and offer better delivery promises, improving conversions and further development of categories to technology.
As a result, we have a record of 50 million buyers and market share gains, especially in Brazil and Mexico. Mercado Pago off-platform TPV accelerated in all main countries. We saw an increased number of users and higher engagement metrics as we position Mercado Pago as a comprehensive financial service provider. On the digital account, we are particularly excited about engagement with more people using the remunerated accounts and other asset management solutions in Brazil and Argentina and better NPS in Mexico from U.S. improvements. In payments, the highlight for Q3 has been online payment solutions represented strong growth across the region. The great business continues to perform within our expectations through very healthy spread levels.
As we saw NPLs improving, particularly in Brazil, we have accelerated originations in all of our products. During Q3, we issued over 1 million credit cards and surpassed $1 billion for the first time. As our underwriting models continue to improve, we can tap into new opportunities offering larger credit lines with longer durations with the best offers of consumers. Overall, in Q3, we achieved a combination of rapid growth, scale gains and margin improvements, showing the strength of our economic model. To deliver these results, we have invested in technology and that provides a world-class user experience and enables us to be more efficient in terms of our cost structure. This results give us confidence to continue investing in future growth opportunities.
And now let me get back to Richard with business news.
Richard Cathcart: During Q3, MercadoLibre we launched our loyalty program as MELI Mas, an important step to enhance our loyalty value proposition with a simpler structure, more compelling shipping benefits and premium video and audio content. With MELI Mas we now have a brand in which we can invest to raise awareness and increase engagement with MELI's ecosystem. MELI Mas gives users access to a world-class content bundle. Free shipping above R$29 and 12 months with free music from Deezer amongst other perks. Our content bundle for MELI Mas users includes Disney Plus and Star Plus and special discounts to subscribe to HBO Max, Paramount Plus, and Lionsgate Plus. Through Deezer, users are able to access a complete library of audio content and music, a service that we think users will be able to enjoy on a day-to-day basis.
Users see the MELI Mas offering throughout our apps and website, where the value proposition becomes clear as they shop with us, with the MELI Mas logo clearly highlighted, building the brand of the loyalty program. The shipping benefits are key to the program. MELI Mas users get free shipping on millions of items above R$29, versus the standard free shipping threshold of R$79, if the product is in one of our fulfillment centers and chosen for delivery on the user's MELI delivery day. As consumers look for products on MercadoLibre, they will see the MELI Mas logo on the products that are eligible and they can filter their search for MELI Mas items. As a new delivery option, loyalty users can choose a specific day of the week to receive all of their packages.
This solution enables us to sell and deliver lower value items with the great experience that MELI is known for, whilst maintaining cost discipline in our P&L. Users still have the option for same and next day delivery if they want their item delivered quickly, if they are willing to pay for shipping on items below the free shipping threshold, or for free for items above the threshold. To access all of these benefits, users can subscribe or earn their way in organically by engaging with MELI's ecosystem. Subscribing is quick and easy, and users can choose between a credit card, automatic charge from their MercadoLibre account, or a monthly invoice. So the subscription is accessible for different types of users. We're able to offer buyers the full benefits bundle for just the equivalent of two to three paid shipping charges.
For users who earn points by shopping with MercadoLibre to get the MELI Mas membership, our credit card offers double points, enabling users to reach the loyalty status more quickly. In August, we launched a big marketing campaign to raise awareness of the program. And initial results give us confidence that MELI Mas complements our value proposition, bringing extensive benefits to even more MercadoLibre users. We're confident in the program's long-term potential because, as always, at MercadoLibre, the best is yet to come.
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